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Posts Tagged ‘gold confiscation’

A gold-standard 1928 one-dollar bill.

Last week, I heard a prominent alternative financial analyst say the U.S. dollar should be replaced with a new currency backed 15 to 20% by gold, or it wouldn’t fly.

However, prior to the 1933 gold confiscation, the U.S. dollar was backed 35 to 40% by gold, and that didn’t prevent the Great Depression, nor the 5000+ bank failures or one-third contraction of the money supply from 1929 to 1932.

Previously, I wrote the articles, Support for a gold-backed currency crosses the political divide and The gold standard loses its perceived lustre, with major media exposure.

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On the June 24, 2010 episode of The Korelin Economics Report, Steve Carr of Alliance Investment Group said in the first segment:

We really encourage people in their diversification, to consider silver above ground, because it’s never been confiscated in the history of this country, and own gold under the ground.

However, silver was confiscated by the U.S. government in 1934, with President Franklin Roosevelt’s Executive Order 6814.

In January 2010, I wrote about the historical confiscation of gold and silver as one of the reasons why platinum is the overlooked investment metal and currency.

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There is growing talk about another confiscation of gold by the U.S. government as gold prices continue to set new all-time highs since 2008. I’ve heard at least three shows this week raise that possibility.

On May 22, 2010, Al Korelin, host of the Korelin Economics Report, had Louis James of the Casey Research Organization on in the last segment of the first hour.

Al Korelin: “One of them is the question of government confiscation, which is something I haven’t thought about, but more and more of my guests are bringing it up. I think that’s an interesting consideration. It has happened before.

Louis James: “It is something that has been done before, and not just by banana republics. The United States government confiscated privately held gold, during the Great Depression era, and yes, that could happen again. Our feeling has long been that that could happen, but the point at which that would happen, the point at which the government would even be willing to talk about gold being an issue, we would already see huge increases in the price of gold. It would become a public problem before the government were to take action. So there would: a) be warning and b) already huge increases for holders of gold and gold in dollar terms.

I agree with James that there would be warning, and a substantial increase over the current price of gold of around $1200 USD an ounce before the U.S. government is likely to confiscate gold again.

It is important to remember that if gold is confiscated again in a similar way to the 1933 precedent, there would be certain exceptions. At the time, they included:

“Gold coins having a recognized special value to collectors of rare and unusual coins,” and “gold coin and gold certificates in an amount not exceeding in the aggregate of $100 belonging to any one person.”

Gold then was worth $20.67 an ounce before the confiscation, and $35 an ounce from then until August 1971, which was equal to 2.8 to 4.8 ounces of gold during that time.

If a future gold confiscation is similar to the 1933 confiscation, it is likely that individuals will be able to keep a similar amount of non-collector gold. The way to keep all your gold in such a scenario would be to buy numismatic gold. That is, gold with a significant premium value over its metal content.

To really be on the safe side, you should consider diversifying into silver, and especially platinum and palladium. Find out why platinum is the overlooked investment metal and currency, and how palladium was the best performing precious metal currency of 2009.

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